Sunday, September 11, 2016

My personal stock investment rules

After a couple years of stupidity, and subsequently many years of successful investing in the stock market, I set a few rules for my investment.

1.Do not buy airlines
2.Buy stocks that have been paying dividend in all the years of listing.
3.Make sure the average dividend for the past five years is at least 5%
4.Do not buy IPO
5.Set a buying and selling price before I buy the shares
6.Understand the factors affecting the business, not the share price.
7.Do not buy stocks with long term debt of more than 30%.
8.Read all the announcements for past three years.
9.Do research in forum, and read the views of current and past shareholders.
10.Must have positive cash flow. Profit and loss are not important. Cash flow is important.
11.Do not buy companies that are in growing stage because these companies burn cash faster than a forest fire burns down the whole forest.
12.Buy shares once or twice a year, not more than that.
13.Hold 5 or 6 companies at any one time, and pay attention to all of them. I do not like diversification. I like focus.

All these are the rules that I have abided for the past few years, and the stock investing experience is very positive.

I do not count the unrealized profit or loss.

I count only the money that comes into my bank account.

Cash is real, and solid. I like dividend income, and I like consistent, stable, and predictable dividend.

This is a very conservative approach to investing, and this method of dividend income investing allows me to feel secure and peaceful.